The Best Reason to Buy Intel Stock

Intel has long owned the PC market, but with sales on the decline, the company is looking for upside in mobile -- where there's nothing but upside.

Intel(NASDAQ:INTC) stock is on a roll once again, and there's one big reason to believe the stock's run can continue: mobile. Intel won't dominate the mobile business overnight, but its new Haswell chip will allow designers to blend the lines between desktop, laptop, and tablet, giving the company a foothold in mobile. Then, it's on to smartphones.

Playing from behindUp until now, ARM-based(NASDAQ:ARMH) chips have dominated tablets and Intel has been shut out. Apple's (NASDAQ:AAPL) newest full-sized iPad uses an ARMv7-based A6X chip and the iPhone 5 runs a less-powerful A6 chip. Apple's giant market share in both product categories means ARM has a large market share in both tablets and smartphones.

But Intel has started to crack the tablet shell. Microsoft's Surface RT used an ARM-based chip, but Intel powered the more advanced Surface Pro. On Monday, Samsung said its next generation 8-inch and 10.1-inch Galaxy Tab 3 will be powered by Intel's Haswell chip. This is the kind of win Intel needs to begin gaining share in mobile.

There's been strong momentum for Haswell across the industry, and more should be coming this week. Hewlett-Packard senior vice president of consumer PCs Ron Coughlin said, "We are all in on Haswell," and expects the convertible segment to pick up as manufacturers offer more form factors. Apple is also expected to power the next-generation MacBook on Haswell. The Galaxy Tab 3 is the biggest individual win for Intel, but there's strong momentum overall into convertibles and tablets.

Intel stock needs mobile to succeed When you look at Intel's financials, it's easy to see why Haswell and the transition to mobile is so important. The PC Client Group saw a 6% decline in revenue during the first quarter and the Other Intel Architecture Group -- which includes tablets and smartphones -- actually saw a 9% decline in revenue and only accounted for 8.5% of the company's revenue.

The PC business isn't going to die completely, but it's in the midst of a long-term decline. The Data Center Group is growing slowly, but it's not going to be a major growth engine like mobile could be.

The reason the Samsung win is so important is because it's an Android-powered device. We can assume that Intel will benefit if Windows is successful in entering tablets and smartphones, but Apple and Google still hold a vast majority of the mobile market share.

If Intel can crack into more tablets and leverage that into smartphones in the next few years, that will drive the stock. If not, investors are only looking at Intel stock for value.

Now is the time to buy Intel's stock is only trading at 12.6 times trailing earnings and pays a 3.7% dividend, which means there's significant upside if it can gain share in mobile. With Haswell gaining momentum and the 14 nanometer Broadwell chip architecture due out next year, I think the company will continue to have design wins over the next two years.

There's nothing but upside in mobile, and that's the biggest reason to buy Intel stock today.

Fool contributor Travis Hoium manages an account that owns shares of Apple, Microsoft, and Intel. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.